FOCUS: Brazil’s MRN shifts bauxite exports to China as seaborne demand grows

Bauxite exports from Brazil’s Mineração Rio do Norte (MRN) have significantly shifted to China since 2014, amid a strong demand from the Asian country and lower alumina refinery capacity in the USA.

In 2016, 41.8% of bauxite shipments from the city of Oriximiná, where MRN operates, were destined for China – up from 18.7% in 2015. (In 2014, China’s share of exports was 4.9%, while the US held a 43.2% share.)

The USA’s share of MRN exports declined to 37.9% and 14.6%, respectively, in 2015 and 2016.

Several factors contributed to MRN’s China shift, industry participants told Metal Bulletin.

Chinese demand for Brazilian bauxite grew following the Indonesian ban on ore exports and the Malaysian ban on bauxite mining, as integrated aluminium producers looked to secure reliable feeds from elsewhere.

At the same time, demand from China has also been supported by the depletion and deterioration of the country’s domestic bauxite reserves.

While Chinese demand growth is expected to stay strong, alumina capacity curtailments in the USA will have contributed to the shift in trade flows towards China.

“We do not see any alumina capacity being resumed in the USA in the near future, while China’s demand will remain strong,” one industry source said.

“This means that MRN’s shift toward Asia is probably here to stay,” the source added.

MRN had not responded to a request for comment at the time of writing.

The company is Brazil’s largest bauxite producer. It produced a record volume of 18.2 million tonnes of the aluminium ore in 2016, up 2.1% from 2015, MRN said in its annual report published earlier this month.

Meanwhile, sales volumes came to 18.09 million tonnes last year, nearly flat from 2015.

Of that total, 48.1% of production was destined for the domestic market, supplying the Alunorte and Alumar refineries, with the remaining volumes being exported.

MRN added in the report that “the average quality levels of the ore shipped in 2016 was 49.37% of usable alumina and 4.25% of reactive silica”.

The company also reported a 24.3% year-on-year decline in its earnings before interest, taxes, depreciation and amortisation (Ebitda) in 2016, to 586.6 million Brazilian Reais ($186.7 million).

Last year’s earnings were negatively affected by lower aluminium prices, higher costs of products sold and especially by higher expenses with demurrage, MRN said in its annual report.

The company has eight shareholders including Vale (40%), South32 (14.8%) and Rio Tinto (12%).

Severe rainfall hits MRN’s exports in 2017
Unusual summer rainfall in Brazil’s Amazon rainforest region, especially in the area of MRN’s operations, has had a negative effect on the company’s production and exports in the first half of the year.

Bauxite shipments from the city of Oriximiná came to 3.79 million tonnes from January to June 2017, down by 14% from a year earlier, according to the Brazilian foreign trade ministry’s figures.

Exports to China accounted for 32.6% of total production in the six-month period, while the USA took 7.2%, the figures revealed.

Planned maintenance at MRN hit production in the first half of the year. At 7.05 million tonnes, bauxite production was down 8.8% year-on-year in the January to July period, as production recovered from maintenance in the first quarter.

The resultant tightness drove reference prices for Brazilian bauxite up to highs of $35.50 per dmtu in March and April this year, as consumers paid higher prices in order to secure additional units on top of their contracted volumes.

Metal Bulletin assessed bauxite prices (52.75% alumina, 5% reactive silica) at $34.50 per dmtu, fob Trombetas, Brazil, on Thursday July 20, up from lows of $32.25 per dmtu in late May.

The situation at MRN has now normalised, and exports are expected to pick up in the second half of 2017, industry sources told Metal Bulletin.

Alcoa’s Juruti mine also focused on China
Alcoa has been vocal about increasing its third-party bauxite sales in order to meet China’s growing demand for seaborne material. The company has forecast a 100% increase in third-party demand between 2015 and 2024, and signed contracts to deliver 2.2 billion bone dry metric tonnes of bauxite to Chinese customers in 2017.

Exports from Alcoa’s Juruti mine in Brazil surged in 2016, reaching 1.05 million tonnes, of which nearly all volumes were shipped to China, according to the figures from the ministry.

This compares with only 52,998 tonnes of bauxite exported in 2015 and no shipments in 2014.

In the first half of 2017, the Juruti mine’s shipments have doubled when compared with the same period of 2016, reaching 565,123 tonnes. All shipments in 2017 so far were to China.

The mine has been consistently increasing its bauxite output by means of productivity gains as it seeks to sell more ore to the Asian country, Metal Bulletin understands.

Phase two of an expansion project at Juruti, expected to start later this year, is expected to contribute an additional 500,000 tonnes of bauxite to Alcoa’s third-party exports, Alcoa’s commercial vp, Otavio Carvalheira, said earlier this year.

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